There is so much demand for goods, domestic supply is not enough. They gobble up whatever is in the US and then look abroad, to places like China, to buy even more.

Yet trade between the two nations isn’t exactly fair.

It’s not as if American consumers and businesses buy American first. They, like everyone else, vote with their dollars. And the cheap goods are produced over in China.

China’s currency manipulation and cheap labour have ensured their exporter status. US businesses move to China to become more competitive. More goods are bought from China.

But when US businesses do cross the water, they’re not given a fair go.

China’s government limits foreign ownership in the country. They’ve used this situation to force knowledge and technology transfers many times.

And of course Trump hates this!

These are American businesses. American innovation. And China wants to use it against the US.

Anyway…we now find ourselves in a trade war. China doesn’t want to budge. And neither does Trump.

They both want opposing outcomes. And they’re both too stubborn to compromise. That’s why I think the recent investor confidence boost will be short lived.

If you haven’t heard, Trump and Chinese President Xi Jinping came to an agreement of sorts. Future import tariff hikes are now on hold.

This means Trump or Xi won’t further tax imported goods from either country. But this isn’t the first step investors were hoping for. Or at least, I don’t think it is.

There’s still a lot that remains unresolved. The biggest issues are still there.

SCMP writes:

‘A 100-day plan that outlined ways for China to open its economy failed to address the Trump administration’s fundamental concerns.

‘Those concerns include US complaints about Chinese intellectual property theft and industrial subsidies, centred on Beijing’s state-backed “Made in China 2025” initiative, a programme to turn China into a leader in a range of advanced technologies.

‘Despite the ceasefire, analysts are sceptical that a deal can be reached on the wide range of prickly trade issues. Only days before the G20 summit, Trump told The Wall Street Journal that it was “highly unlikely” he would delay the January 1 tariff increases, insisting that the brunt of the existing tariffs were being borne by China.

‘He also said the US was ready to levy tariffs on the remaining US$267 billion in Chinese imports, including consumer goods such as Apple products.

‘The White House is insisting on structural reforms to China’s economy, beyond window-dressing measures to close the trade imbalance, but Xi is unlikely to make major concessions given the inevitable domestic political backlash, analysts say.’

Will Trump or Xi back down first?

For Trump or Xi to back down would show a complete lack of principles.

I think it will have to be Trump who backs down first, before Xi. I don’t know about you, but 243 officials committing suicide is no coincidence.

Maybe the government didn’t have a hand in their deaths. But the threat of government punishments sure did.

A lot of those now gone might have thought death was a better option to whatever else was in store.

Maybe they were protecting their families. Or maybe they knew life after such an investigation was no life at all.

To me, it just shows how ruthless China’s government can be when the individual gets in the way of the collective.

China is striving for the greater good for the collective. And they’re willing to steamroll individuals who try and get in the way.

So in a month or so, we’ll be right back to where we started. No more grace period. Trump on one side and Xi on the other.

Harje Ronngard is one of the editors at Money Morning New Zealand.
With an academic background in finance and investments, Harje knows how difficult investing is. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation.
There are two questions Harje likes to ask of any investment. What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Money Morning New Zealand readers.

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